| ACC Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities of ACC Ltd (ACC).
In 2020 (refers to calendar year, January 1 to December 31), ACC’s consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) margin increased by around 200 basis points supported by higher realisation and softer input cost, thereby mitigating the impact of Covid-19 on sales volume (down by 11.6% year-on-year). Notwithstanding the impact of the second wave of the pandemic, CRISIL Ratings estimates volumes to grow 6-8% in 2021 owing to low base and expected pick-up in infrastructure demand. The EBITDA margin could moderate marginally in 2021 because of rising input cost but will still remain higher than the historical average.
The ongoing greenfield capital expenditure (capex) in Ametha (Madhya Pradesh) and brownfield expansion of grinding unit in Tikaria (Uttar Pradesh) are expected to be commissioned in the second quarter of 2022, while the greenfield capex in Shonebhadra (Uttar Pradesh) is expected to be commissioned in fiscal 2023 and further strengthen market position. The financial risk profile continue to remain robust, supported by debt-free operations and significant cash surplus maintained along with healthy cash accrual generated.
For the three months through March 2021, the sales volume increased around 21% (year on year) on the back of healthy demand and low base, which was impacted because of the lockdown in the last two weeks of March 2020. During first quarter of 2021 (January to March), EBITDA margin improved to 20% from 16.8% in the corresponding quarter of previous year driven by healthy realisation and lower cost.
The ratings continue to reflect the robust operating efficiency of the company and strong financial risk profile because of healthy cash flows. These strengths are partially offset by susceptibility to the commoditised and cyclical nature of the cement industry. Any substantial debt-funded capex or acquisition, which may weaken the financial risk profile, will be a key rating sensitivity factor. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of ACC and Ambuja Cements Ltd (Ambuja Cements; 'CRISIL AAA/Stable/CRISIL A1+'). This is because, post the restructuring between ACC and Ambuja Cements, ACC became a subsidiary of Ambuja Cements. Moreover, both the companies have a common line of business, and have entered into master supply agreement, which helps them operate symbiotically, optimising each other's plant capacities and spare inventories, and thus, benefit from operational and financial synergies.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Healthy market position ACC had total installed capacity of 34.5 million tonne per annum (MTPA) as on March 31, 2021. It has a large marketing infrastructure, pan-India presence and strong operational linkages with Ambuja Cements (29.65 mtpa capacity as on March 31, 2021). The companies together have 12-13% capacity share in the Indian cement market. Their nationwide presence shields operations from regional price volatility and demand-supply imbalances.
Consolidated gearing remained healthy. Also, strong cash flow and low debt levels translate into robust debt protection metrics. In 2020, ACC’s consolidated net cash accrual was around Rs 1800 crore. Supported by healthy cash accrual and minimal reliance on debt, the debt protection metrics will remain strong over the medium term.
Weakness: Susceptibility to volatility in input cost and realisations, and cyclicality in the cement industry |
Liquidity : Superior Liquidity remains robust in the absence of external debt. Expected capex of around Rs 3,500 crore over the medium term, towards capacity addition and efficiency capex, will be entirely funded through internal accrual. Cash and cash equivalent stood at Rs 5,849 crore as on December 31, 2020. Cash accrual is estimated over Rs 1,900 crore in 2021. Unutilised bank limits and healthy cash accrual will be sufficient to meet capex and working capital requirement.
Under Ambuja Cements, debt primarily consists of interest-free loan from the state government. The company has announced capex of around Rs 2,500 crore to be spent over a period of 2-3 years towards capacity addition, captive power plant, plant maintenance and other infrastructure developments. Cash and cash equivalent stood at Rs 2,717 crore as on December 31, 2020. Unutilised bank lines and healthy cash accrual will sufficiently cover capex and working capital requirement. |
Outlook : Stable CRISIL Ratings believes ACC will maintain its strong financial risk profile over the medium term, supported by healthy cash accrual and low debt. |
Rating Sensitivity factors Downward factors
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About the Company ACC is the oldest cement company in India, with total installed capacity of 34.5 mtpa as on March 31, 2021. The company also manufactures ready-mix concrete and has 50 plants across the country. ACC and Ambuja Cements are part of the LafargeHolcim group. As on March 31, 2021, LafargeHolcim held 63.27% stake in Ambuja Cements, which held 50.05% stake in ACC; LafargeHolcim also holds 4.48% stake in ACC through Holderind Investments Ltd.
For the three months ended March 31, 2021, ACC’s consolidated profit after tax (PAT) was Rs 563 crore on operating income of Rs 4,292 crore, compared with PAT of Rs 323 crore on operating income of Rs 3,502 crore for the corresponding period last year. |
Key financials* (ACC – consolidated)
*as per CRISIL analytical adjustment
Key financials* (Ambuja Cements Ltd – consolidated)^
*as per CRISIL analytical adjustment ^Financials for the year ended December 31; includes consolidated numbers of ACC |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
*Subsidiaries of Ambuja Cements Ltd ^ JV of Ambuja Cements Ltd # ceased to be a subsidiary w.e.f. 18th November 2020 |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Letter of credit & Bank Guarantee | HDFC Bank Limited | 300 | CRISIL A1+ |
| Letter of credit & Bank Guarantee | State Bank of India | 800 | CRISIL A1+ |
| Overdraft Facility | Citibank N. A. | 35 | CRISIL AAA/Stable |
| Overdraft Facility | HDFC Bank Limited | 90 | CRISIL AAA/Stable |
| Overdraft Facility | JP Morgan Chase Bank N.A. | 1 | CRISIL AAA/Stable |
| Overdraft Facility | State Bank of India | 5 | CRISIL AAA/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 199 | CRISIL AAA/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 190 | CRISIL AAA/Stable |
This Annexure has been updated on 2-Sep-2021 in line with the lender-wise facility details as on 20-Aug-2021 received from the rated entity.
Criteria Details
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